Health and Safety is critical to running a successful and safe farming business. Whether you own a Farm, Sharemilk, Contract Milk or work as an employee, we thought it timely to take the time this Christmas to talk about health and safety to ensure everyone enjoys going home safely to celebrate this holiday season.
Employers – the Legal Bits
Currently the Health and Safety in Employment Act 1992 (Act) hands employers the primary responsibility for staff safety and ensuring anyone else within the vicinity of the workplace is safe. At the very least employers must take “all practicable steps” to:
Have an effective hazard management system in place that identifies existing, new and significant hazards on an ongoing basis (Think: Living, Breathing Hazard Register and Controls).
Eliminating significant hazards. But if you can’t or it’s not practical to, you must isolate or minimise significant hazards such as ensuring staff use suitable clothing and equipment (Think: Quad Bike Helmets!).
Train and supervise staff to ensure they have the right knowledge and experience they need to work safely on the job, and with any plant or substances they’re using (Think: New staff Inductions and training records)
Involve staff in health and safety matters by ensuring they get reasonable opportunities to help you improve it and by giving staff access to easily understandable information about emergencies, hazards and safety clothing and equipment (Think: Regular meetings and discussions on health and safety)
Record and notify WorkSafe where appropriate of accidents and serious harm (Think: Prioritising Paperwork).
As well as all this, employers must ensure their staff don’t do anything that might harm anyone else in the workplace. Employees need to ensure their own safety and that they don’t cause harm to others.
If an accident happens in your workplace and an employee or someone else is harmed, WorkSafe or the Court will consider whether you have taken all the steps that were reasonably practicable to take in all the circumstances to protect staff. What the industry is doing and the “current state of knowledge” about harm, how to prevent it and the availability and cost of the means you could use, are all relevant. This is why having a health and safety policy and plan tailored specifically to your workplace is so important. The District Court commented back in 1999 that written policies are a no-brainer:
It needs to also be emphatically said that by now all employers should be aware of the need to have a written policy in place and it is not sufficient to simply, when something happens, try and explain away the situation by saying that safety courses had been attended to and that employees should have been responsible or OSH should have done more. A general message needs to be sent to all employers again that it is incumbent on an employer to have written policies in place.
The Principal of It
It’s not just employers that can be penalised for getting it wrong – anyone who controls a workplace and Principals engaging contractors must comply with obligations too. Any person who controls a workplace, including place or plant owners, must take all practicable steps to ensure that no hazard that is or arises there harms anyone nearby and anyone lawfully present like customers and contractors and their staff. You must also warn anyone visiting recreationally about any unusual hazards.
Principals must take all practicable steps to ensure that none of their contractor’s staff are harmed while doing work they’re engaged to do. If you sell or supply machinery, you need to actively enquire as to whether its destined for a workplace and if so, take all practicable steps to ensure it is designed, made and maintained so it’s safe for its intended use (excluding second-hand goods sold on an “as is” basis).
The Legal Bits that Bite
Failing to comply with your obligations as an employer, principal or employee can cost. For an offence likely to cause serious harm, you risk being jailed for up to 2 years and/or a fine of up to $500,000. For other offences you risk a fine of up to $250,000 or if it’s about your duty as a person controlling a workplace, a fine up to $10,000. You don’t even have to intend to breach your obligations.
You need to know that people and entities can owe more than one duty, several people or entities can have the same duty and you can’t blame someone else for your mistakes. For example, the Court of Appeal has made it very clear that although an employer bears a heavy burden to protect staff, Principals cannot avoid their obligations by delegating health and safety to a contractor. All duty holders must take a proactive and preventive approach to promoting health and safety in the workplace:
The fact that the primary obligation to procure safety rests upon the employer does not exonerate or diminish the responsibility of other persons in the other capacities recognised in ss 15 to 19 from discharging the statutory duty imposed upon them. Section 2(2) could not be more clear; the same person may represent two or more of these capacities; the same duty may at the one time be imposed on two or more persons whether in the same capacity or a different capacity; and no duty imposed on any person is to be diminished or affected by the fact that it also may be imposed on one or more other persons. The Act does not then adopt a prescriptive approach to the duties of those made responsible for safety in the workplace.
It provides a comprehensive set of general principles but leaves the detail of acceptable practices to be worked out and implemented by regulations and codes of practice within the various industries.
A Principal cannot escape liability by attempting to distance itself from what happens onsite, engaging a competent contractor or by pointing out a contractor’s breaches. More must be done like stipulating in advance what safety standards a contractor must observe and taking action if unsafe practices are observed.
Agricultural workplaces are no different. Farm owners and sharemilkers often share responsibility and risk prosecution for failing to take an active interest in health and safety. In a tragedy close to home, sharemilkers in a 50/50 Sharemilking arrangement with a farm owner, found themselves liable for the failure to ensure the proper guarding of a PTO resulting in their Farm Manager’s death. The Sharemilkers who employed the farm manager were found in breach of their obligations to ensure staff safety. The farm owner, who lent the tractor to the sharemilkers and farm manager, was found in breach of the obligation to ensure the safety of contractors and their staff.
Directors and agents of a company won’t escape either if they are found to have authorised or otherwise participated in any failure by a company. You may recall a case in 2009 where a cool store exploded after a contractor installing a substandard refrigeration system. The explosion killed one firefighter and seriously injured several others. The company in control of the worksite and who gave permission for the firefighters to enter, its managing director, and the contractor who installed the substandard refrigeration system in the first place, were all prosecuted and penalised for their failures to adequately protect employees or others against hazards within the workplace. In another case the District Court held someone liable due to their ability to enter into contracts for the company they worked for even thought they were not a director:
… a company operates through its human officers. There is no ability in fact to make decisions on its own so it is the failure of Mr Mann which in fact renders the company liable at all. Those who are agents or officers of companies need to know that they cannot shelter behind the corporate veil and will be regarded as giving rise to a company’s liability in the circumstances where they fail to comply with the obligations.
Since the High Court’s landmark case that set out the way offenders will be sentenced, the Court’s have repeatedly adopted an approach that takes into account a person’s culpability that includes identifying what practicable steps a person should have taken. It is likely that the more steps someone fails to take the higher the culpability and any fine.
What it means for you and your farm
The obligations imposed on farm owners, contractors and employees are as varied as the business structures, staff relationships, farm terrain and types of machinery and buildings you have. This demands a tailored and specific approach to how you handle health and safety. You cannot easily comply with your obligations by using generic health and safety documentation. Although many similarities exist and we encourage information sharing, an employer, principal or other duty holder personally bears the responsibility for ensuring they comply with their specific obligations. These obligations cannot be contracted out of or delegated.
For an employer, the duty to effectively manage hazards is specific to your workplace and your farm. You must systematically identify existing, new and significant hazards where you work and work out the best way to eliminate, isolate and minimise hazards, train and supervise your team on the work, handle hazardous substances, and involve your staff in health and safety matters. Clearly a practicable step is ensuring you have a comprehensive and robust health and safety policy and plan tailored to your workplace.
For a Principal, you will want to ensure that sharemilkers and contractors have adequate systems in place and require regular audits of health and safety practices. At the very least, a savvy Principal would require every farmer and employer to put in place a health and safety policy and plan specific to where they work and what they do. Having a plan specific to a Principal’s unique obligations is key too. Then if an accident happens, you can show that you have taken this step to comply with obligations.
You can still slip up if you don’t use and update your plan though, even the most sophisticated plan is useless if it’s sitting there collecting dust!
Reforming your thinking
An employer’s obligations will only increase under the Health and Safety Reform Bill (Bill) that aims to provide for a framework to secure the highest level of protection against harm to the health, safety and welfare of workers (widely defined to include contractors and their staff). The Bill would introduce a wider concept of a person conducting a business or undertaking (PCBU). This would include employers and principals who would both owe a primary duty of care to take all reasonably practicable steps to protect workers against harm. Similar duties would apply to those managing or controlling a workplace to protect others, as well as those providing plant. In addition, anyone who makes decisions affecting the whole or a substantial part of a PCBU (Think: Directors and Farm Managers) would owe a duty to exercise due diligence to ensure that the PCBU complies with its obligations. This would include the Officer taking reasonable steps to ensure they are up to date with health and safety as it relates to the nature of operations and ensure adequate resourcing and processes for ensuring health and safety are in place and verifiable (Think: regular audits and a paper trail).
This means that under the Bill, many key decision makers involved in a farming business would likely be a PCBU and/or officer and liable for the much higher penalties that could be imposed for failing to comply with duties. For a PCPU or Officer this is up to $100,000 for failing to comply with a duty even if it does not result in risk exposure and up to $600,000 for a reckless breach; for a body corporate, up $500,000 or $3 million:
Thank you for taking an interest in the health and safety of your staff – it makes good business sense. If you or anyone you know is unsure about their obligations, or would like to understand how your business could benefit from having a health and safety policy and plan tailored to your workplace – get in touch with a member of the Progressive Agri HR team. We will update you on the Bill as it progresses through Parliament.
By Janet Copeland
Under the KiwiSaver Act 2006 (KSA) an employer is obliged to pay compulsory employer contributions (CEC) for each employee who is enrolled within an eligible KiwiSaver scheme or complying superannuation fund, unless, the employee has turned 65 years old or has been in KiwiSaver for at least 5 years (whichever is later). The contribution rate determines how much CEC an employer must pay, this is set currently at 2% of an employee’s gross salary or wages.
There are two ways employers may pay their CEC’s under the Act; through either the default approach or what is known as the total remuneration approach. This article focuses on the requirements of the total remuneration approach and recent case law on the matter.
DEFAULT APPROACH
The default approach to paying compulsory employer contributions is that the CEC must be paid in addition to the employee’s gross salary or wages. Any arrangement otherwise is of no effect unless it falls within the exception outlined in s101B (4) of the KSA.
TOTAL REMUNERATION APPROACH
This exception is widely known as the total remuneration approach and allows parties to freely agree to contractual terms and conditions that disregard the default position. The total remuneration approach provides for all payments an employee receives under their employment agreement including salary, wages, allowances or CECs. This approach will fail to apply where the contractual terms and conditions do not account for the amount of compulsory contributions the employer is required to pay. What is required to “account for” the CEC has been a grey area, but has been traversed by the full Employment Court in the recent case of Faitala v Terranova Homes & Care Ltd [2012] discussed in depth below. The Court held that a calculation of the actual CEC based on the employees gross wages or salary is not required, rather a simple statement of how the figure was arrived at will suffice, such as referring to the current contribution rate.
WHAT IS INCLUDED IN TOTAL REMUNERATION?
A total remuneration approach enables the parties to agree, under the employment agreement, to include into a remuneration package the employer’s contribution as an identifiable component of the employee’s pay.
For example Jane Bloggs’ Total Remuneration Package:
Compulsory Employer Contribution $785.00 (2 % of base salary)
Take home salary (base salary) $39,215.00 (less taxes and deductions)
Total Remuneration Package $40,000.00
The advantages of total rem are that when the CEC increases, the amount adjusts within the capped total remuneration package. For example, if the CEC increases to 3%, the base salary or wage would decrease (to $38,835.00) to account for the change, but the overall total remuneration remains the same ($40,000.00).
The legislative history and the express requirement to negotiate such arrangements in good faith make it likely that an employee, who is currently paid CECs on top of their remuneration, should not have their wages or salary reduced to incorporate CECs within their current remuneration. However, future variations and/or any new employment agreements can legally include such an arrangement, provided this arrangement is stipulated. An employer can negotiate a total remuneration clause into an existing employee’s contract by accompanying the offer with the employee receiving at least a 2% pay rise to cover the amount of CEC, provided the employee agrees to formally vary their employment agreement to include the total remuneration.
RECENT CASE LAW
In Faitala v Terranova Homes & Care Ltd [2012] NZEmpC 199 Chief Judge Colgan and Judge Inglis in the full Employment Court had to determine whether Terranova Homes & Care Ltd was entitled to deduct the CEC from the employee’s gross wages in circumstances where those wages are at the minimum level specified in the Minimum Wage Act 1983 (MWA).
Under section 6 of the MWA, an employee is to receive payment for her work from her employer at not less than the minimum rate (currently $13.50 per hour) this is to apply notwithstanding anything to the contrary in “any other enactment, award, collective agreement, determination, or contract of service”. Two issues were said to arise from this, firstly, whether payment of an employee contribution through the IRD to an employees KiwiSaver is payment “received by an employee from their employer” and secondly, whether this constitutes “payment for the employee’s work”.
The Court stated the underlying purpose of the MWA is to ensure that workers receive a living wage to meet the basic day-to-day living expenses of the worker and his/her family. The court said there was nothing to suggest that it builds in a component for saving for retirement, rather it is designed to meet the basic necessities of day-to-day living. The CEC is not paid to the employee rather it is paid to a KiwiSaver provider or complying superannuation fund via the IRD, and then held for the benefit of that person until they turn 65 years (or qualify for withdrawal). Thus the employee may have upwards of 50 years before he/she receives the benefit of the contribution. Additionally, if the money is paid out it is not paid out as salary; rather, it is paid out as pension. Section 4 of the KSA expressly excludes complying superannuation funds form the meaning of salary and wages.
The contribution is payable by virtue of the employee’s election to join KiwiSaver, the trigger is the operation of the statute rather than the labour performed. The employer contribution is not money exchanged for labour and no consideration is provided in exchange for it. Therefore the Court concluded that a deferred payment to an employee of a CEC does not constitute payment by an employer for work performed by an employee for the purposes of the MWA.
Relationship between the KSA and MWA
Section 101B of the KSA deals with the way in which an employer may make contributions to a KiwiSaver scheme or complying superannuation fund. The default position is that the CECs are paid in addition to an employee’s gross salary or wages. However, section 101B(4) provides the exception that parties to an employment relationship may agree contractual terms and conditions that disregard the purpose unless the contractual terms and conditions don’t account for the amount of compulsory contributions the employer is required to pay.
The Court held that nothing in s101B states the parties are free to agree contractual terms and conditions that override the MWA and section 6 prohibits such an approach. The Court said the MWA is designed to provide a mandatory floor by which an employer can not go below and if Parliament intended to provide an exception to the MWA it would have done so expressly. The Court stated when ss 6 and 101B are read together, and in light of their respective purposes, it is apparent that the latter is to be read subject to the former. This means that for an employee on minimum wage an employer is obliged to pay the 2% contribution in addition to the minimum wage.
What is needed to “account for” the amount of compulsory contributions?
The Court stated the requirement to account for the amount of compulsory contributions does not require a statement of a numerical figure, rather a simple statement as to how that figure is arrived at. In the present case the amount was determined by reference to the prevailing statutory rate contained within the KSA which the Court said was sufficient to account for the amount of compulsory contributions. The Court said adding a numerical amount would require amending the provision each time the minimum wage was altered, the Court said this degree of specificity was not required on a plain reading of s101B(4)(b).
IMPLICATIONS
This case demonstrates that an employer cannot apply a total remuneration approach that negates the requirements of another act that confers minimum payment rights to employees, such as the Minimum Wage Act. This case also helpfully demonstrates what is required to “account for” the amount of CEC, where a simple statement of how the figure was arrived at will suffice, such as referring to the current contribution rate.
PROPOSED AMENDTMENTS TO THE KSA IN 2013
There are proposed changes to employee and employer contribution rates from 1 April 2013 with the minimum employee contribution rate rising from 2% to 3% for all members and the minimum CECs will rise from 2% to 3%.
RECOMMEDATIONS
We recommend including a clause in employment agreements that seeks to incorporate CECs in the total remuneration of a new employee or during negotiations with a current employee as a variation to their terms and conditions. However, note that during any negotiations the wages or salary of a current employee should not be reduced, particularly if they are currently paid CECs on top of their remuneration. Such an employee cannot have their wages or salary reduced to incorporate CECs within their current levels of remuneration in light of the legislative history and the express requirement to negotiate such arrangements in good faith.
Disclaimer
This article is produced to provide a brief summary of issues that have developed in the area of employment law. While we take time to ensure the information is correct, details may be omitted which may be directly relevant to a particular reader. The information should not therefore be taken to be sufficient for making decisions. If you have any questions in relation to anything discussed in this article or just a general query, contact the writer or team at Copeland Ashcroft Law who will be happy to assist you.
First published in Pay and You (PAY) – Issue 2, February 2013
http://www.nzppa.co.nz/magazine/02/
On 1 July Immigration New Zealand is launching a new information service model for new migrants to help them settle and work in New Zealand. The model is for new migrants, their families and their employers and will offer more services in more locations throughout New Zealand.
The primary resource for generic and local information about living and working in New Zealand will now be through (New Zealand Now www.newzealandnow.govt.nz).
From 1st July, Immigration New Zealand is also introducing a settlement information service to its Contact Centre. Information about living and working in New Zealand will be available via the free-phone number 0508 558 855, (press 2). Further, from 1st July, email queries can be emailed to (newmigrantinfo@mbie.govt.nz).
Shortly, Immigration New Zealand will announce a new face-to-face service provider for those new migrants who prefer to speak to someone about their settlement information needs. The new provider will also deliver workshops and seminars about living and working in New Zealand for new migrants in local areas throughout the country.